Horizon Scanning Q3 2025 Bulletin – Evolving regulatory risks shaping the financial services sector outlook
· Posted on: November 6th 2025 · read
Welcome to the Q3 2025 edition of the MHA Horizon Scanning Bulletin, your essential guide to the evolving regulatory and risk landscape impacting the UK financial services sector over the next 18 months.
MHA is pleased to present this independent view of emerging regulatory priorities and macroeconomic trends. This edition provides a client-focused view of how recent regulatory developments, building on the Bank of England’s policy announcements and Sam Woods’ final Mansion House speech, are reshaping the financial services landscape.
The report highlights the implications of the Bank of England’s evolving policy direction for firms’ capital strength, liquidity management, and governance. As supervisory scrutiny continues to rise, firms must remain agile and focused on strengthening control frameworks.
Key Snapshot
The PRA and FCA remain aligned in strengthening assurance expectations. Boards should focus on strengthening operational resilience, managing exposures to non-bank lending, and ensuring robust oversight of technology and data risks.
Headline points discussed in the new edition include:
- Operational Resilience Supervisory scrutiny continues, with particular emphasis on operational-resilience testing and strengthening control frameworks.
- Prudential Implementation Focused attention on Basel 3.1 implementation and Solvent Exit Planning, the latter of which comes into force on 1 October 2025.
- Regulatory Focus on Risk The PRA and FCA are strengthening assurance expectations, urging firms to turn compliance into a strategic advantage.
- SMCR Simplification The PRA and FCA are simplifying the Senior Managers and Certification Regime (SMCR) for smaller firms.
Regulatory & Market Developments
Prudential Regulation & Oversight
Key updates from the Financial Policy Committee (FPC) and Prudential Regulation Authority (PRA):
- Leverage Ratio Framework: The FPC reviewed its Direction to the PRA and judged that the leverage ratio should remain unchanged, confirming the appropriateness of continuing to exclude central bank reserves from the calculation.
- PRA Rulebook & Basel 3.1: The implementation date for the final rules and policy material reflecting changes in PS12/25 is 1st January 2026
- O-SII Buffer Rates: Revised 2024 Other Systemically Important Institution (O-SII) buffer rates will be applicable from 1st January 2026
- Risk Model Access: The PRA has observed that medium-sized firms face barriers in developing Internal Ratings Based (IRB) models for Loss Given Default (LGD) and Probability of Default (PD) estimation, which may constrain competition and growth.
Financial Conduct Authority (FCA) & Retail Focus
The FCA continues its intense focus on consumer outcomes and market integrity:
- Motor Finance Compensation Scheme: The FCA published a consultation paper (CP25/27) on proposals for an industry-wide compensation scheme for motor finance customers who were treated unfairly. Firms have until after 4 December 2025 to provide a final response to motor finance non-DCA complaints.
- Future of Open Banking: The FCA published a feedback statement (FS25/4) following proposals on the design of the future entity for UK open banking
- Redress System Modernisation:The FCA and the Financial Ombudsman Service (FOS) published a joint consultation paper (CP25/22) on modernising the redress system.
- SMCR Simplification: Changes to the SMCR, designed to reduce burden on smaller firms, include:
- Providing firms more time and flexibility to submit applications for new senior managers.
- Stripping out duplication in certification, which would reduce the number of certification roles by 15%.
Economic & Policy Landscape
Insights from the Monetary Policy Committee (MPC) and wider government policy:
- Labour Market Conditions: Employment growth remains near zero, and the vacancy-to-unemployment ratio continues to fall below equilibrium, with vacancies declining in the three months to August.
- MiFID Org Regulation: HM Treasury intends to make a statutory instrument to revoke the MiFID Org Regulation on 23rd October 2025.
- CRD VI Directive: Transposing of the CRD VI Directive is expected in Jan 2026.
Next Steps
As regulatory expectations rise, MHA is committed to helping clients turn compliance into strategic advantage through pragmatic, risk-aligned solutions.
Should you wish to discuss how MHA can support your next regulatory milestone or explore tailored assurance solutions, our GRC team would be pleased to help.
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